Factory employees work on Ford Crown Victoria vehicles on Thursday

Factory employees work on Ford Crown Victoria vehicles on Thursday

The R-word won’t go away

Is Canada in a recession? A majority of Canadians think so. The data and economists say otherwise.

OTTAWA — Is Canada in a recession? A majority of Canadians think so. The data and economists say otherwise.

The issue arose when pollster Michael Marzolini of Pollara reported to the Economic Club recently that an astounding 70 per cent of Canadians felt the R-word applied to today’s economy, and a similar number thought the downturn would last at least another year.

The finding was immediately scoffed at by economists and policy-makers who pointed out that the recession officially ended two and a half years ago, in the summer of 2009. Since then, except for a brief skid in the second quarter of 2011, the economy has been growing steadily.

Numbers don’t lie, they say. Hardly a day goes by when Prime Minister Stephen Harper and Finance Minister Jim Flaherty — among other government ministers — don’t trumpet the fact that Canada has created more than 600,000 new jobs since the slump, much more than the 400,000 or so that were lost.

So why do Canadians feel so poorly?

The main reason is that Canadians likely perceive what is a recession differently than economists, and if numbers don’t lie, they can be selective.

The technical definition of recession is when real, inflation-adjusted gross domestic product — the broad measure of economic output — falls in back-to-back quarters. That happened in the fourth quarter of 2008 and the first two quarters of 2009 — a nine month retreat.

But real GDP doesn’t tell the whole story, or even the most important story about an economy’s health.

Real GDP adjusts for inflation, but not for population. That means a country’s economy can be growing simply because the population is rising, and Canada’s population increases about one per cent a year.

Similarly, residents of a country such as Japan with a declining population, become richer even when their economy is not growing.

Canada’s economic performance looks different when population growth is factored out.

By that measure, Canada’s per-capita GDP is still 1.4 per cent below what it was prior to the recession, more than three years ago.

“To most people, real GDP doesn’t really matter, what matters is per capita income,” said Craig Alexander, chief economist with the TD Bank.

Canadians are not doing so well on the issue of net worth, either. While slightly higher, household net worth is below 2008 levels once inflation is taken into account, and income growth has also fallen below the rate of inflation this past year. That means Canadians are poorer and their disposable income is now declining.

“Canadians are looking at things like grocery costs, fuel costs, housing costs, user fees, less net incomes,” Pollara chief operating officer Robert Hutton said of his firm’s polling results.

“People are just reporting overwhelmingly, ’You know I’m not getting ahead, at best I’m staying even.’ ”

Perhaps the most trumpeted statistic purportedly showing how well Canada has rebounded is jobs.

The Pollara poll shows Canadians aren’t buying it, however. Every week they read about factories shutting down, layoffs, or companies demanding workers accept wage cuts. Last week Toronto’s Pearson airport sent out pink slips to 299 workers, on the heels of other layoffs in the city and streamlining of drug research operations in Montreal.

Anecdotal events may impact the perception of bad times, but the macro numbers — if the right ones are cited — also point to weak labour conditions.

The simple calculation is that employment in Canada is about 182,000 above pre-slump levels. That looks great when measured against the U.S., which is still six million shy. And it looks good compared to 2008, as well.

But the fly in the ointment again is population. More Canadians came of working age in the past three years, and immigrants kept arriving — they too are looking for work. To return to pre-slump levels of employment, the economy would have needed to generate an additional 750,000 jobs beyond the pre-slump peak, not merely 182,000.

Canadian Auto Workers economist Jim Stanford, who has studied the jobs record extensively, says the telling statistic is the employment rate, which calculates people working in relation to those of working age, or over 15.

The employment rate peaked in February 2008 at 63.8 per cent, dipped to 61.3 per cent in July 2009 at the tail end of the recession, then climbed to 61.8 in the next year. It has since edged down to 61.7, and is still more than two percentage points below the pre-slump high.

“That means we’ve fixed one-fifth of the damage, and fourth-fifths of the damage is still with us. That’s why it still is recessionary conditions,” said Stanford.

Adding to the perception of gloom, said Alexander, is that in many cases people who lost jobs in the recession were not the people who found jobs in the recovery. Most lost jobs were in high-paying manufacturing industries, and most of those created have come in lower-paying service industries.

That does not mean Canadians are right that the country is in recession, however. Even Stanford will acknowledge that.

The confusion stems from the official definition of recession and what Canadians think it is. For most people, recession is a description of a bad economy; for statisticians, it’s simply the direction the economy is moving.

Philip Cross, chief economic analyst for Statistics Canada and the person who declares the country in or out of recession, admits he gets grief every time he pronounces the country out of a slump.

“Invariably when we say the recession is over, I get a great deal of abuse because people say the level of economic activity is still rotten,” he explained.

“When we say the recession is over, what we’re saying is the period of things getting worse by the day is over. The level of economic activity could still be unacceptable, but at least you are going in the right direction, rather than the wrong direction.”

Canadians may be confused about the definition of recession, agrees Stanford, but they are correct in thinking they are still worse off than they were three years ago.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Lyn Radford, 2019 Canada Winter Games board chair, was named 2020 Sport Event Volunteer of the Year at the Prestige Awards. (File photo by Advocate staff)
WATCH: Lyn Radford wins award for volunteer efforts

The board chair of the 2019 Canada Winter Games in Red Deer… Continue reading

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Red Deer dips below 300 active COVID-19 cases

The number of active COVID-19 cases in Red Deer continued to drop… Continue reading

A candlelight vigil will be held in Red Deer on Thursday to honour the 350-plus people killed in the Easter bombing attack in Sri Lanka. Contributed photo
Candlelight vigil planned for deaths linked to Olymel COVID-19 outbreak

A candlelight vigil is being planned for those who died due to… Continue reading

Red Deer Rebels forward Jaxsen Wiebe battles Calgary Hitmen forward Cael Zimmerman for a loose puck when the two teams squared off in February last season. (Photo by BYRON HACKETT/Advocate Staff)
Calgary Hitmen shutout Red Deer Rebels

Rebels name centre Jayden Grubbe team captain ahead of Friday’s game

Bryson, six, and Mara, eight, play with puppies from Dogs With Wings Saturday. (Photo by Sean McIntosh/Advocate staff)
WATCH: Dogs With Wings introduces Red Deer program

A program that trains puppies to be certified service, autism, facility and… Continue reading

Walter Gretzky father of hockey hall-of-famer Wayne Gretzky waves to fans as the Buffalo Sabres play against the Toronto Maple Leafs during third period NHL hockey action in Toronto on Tuesday, January 17, 2017. THE CANADIAN PRESS/Nathan Denette
Funeral for Walter Gretzky to be held Saturday in home town of Brantford, Ont.

The funeral for hockey legend Wayne Gretzky’s father Walter will take place… Continue reading

A sign for the Canadian Security Intelligence Service building is shown in Ottawa on May 14, 2013. A newly released audit report shows that difficulties with the judicial warrant process at Canada's spy agency — an issue that made headlines last summer — stretch back at least nine years. THE CANADIAN PRESS/Sean Kilpatrick
Spy warrant shortcomings stretch back almost a decade, newly released audit shows

OTTAWA — A newly released audit report shows that difficulties with the… Continue reading

In this file photo, a lotto Max ticket is shown in Toronto on Monday Feb. 26, 2018. (By THE CANADIAN PRESS)
No winning ticket for Friday night’s Lotto Max jackpot

TORONTO — No winning ticket was sold for the estimated $29 million… Continue reading

A trial countdown sign marks the days at George Floyd Square, March 4, 2021, in Minneapolis. Ten months after police officers brushed off George Floyd's moans for help on the street outside a south Minneapolis grocery, the square remains a makeshift memorial for Floyd who died at the hand of police making an arrest. The trial of former Minneapolis police officer Derek Chauvin will begin with jury selection on March 8. (AP Photo/Jim Mone)
Officer’s trial could reopen intersection where Floyd died

MINNEAPOLIS — During a group’s recent meeting at the now-vacant Speedway gas… Continue reading

FILE - In this Aug. 30, 2020 file photo Portland Police Chief Chuck Lovell calls for an end to violence in the city during a news conference a day after a demonstrator was shot and killed in downtown Portland. Amid protests following the police killing of George Floyd last year Portland dissolved a special police unit designed to focus on gun violence. Critics say the squad unfairly targeted Black people, but gun violence and homicides have since spiked in Oregon's largest city, and some say disbanding the 35-officer unit was a mistake. (Sean Meagher/The Oregonian via AP, File)
As violence surges, some question Portland axing police unit

PORTLAND, Ore. — Elmer Yarborough got a terrifying call from his sister:… Continue reading

Harley Hay
Harley Hay: Just don’t call it cod liver oil

Many people swear that a daily dose of various vitamins is an… Continue reading

Email editor@auburn-reporter.com
Letter: Preserving green spaces in Red Deer

The Advocate published an article Feb. 11 about Sunnybrook residents concerned about… Continue reading

Former Toronto Argonauts lineman Chris Schultz remembered as a gentle giant

Former Toronto Argonauts lineman Chris Schultz remembered as a gentle giant

Most Read